Hope and lifetime learning credits. Beginning in 2006, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $45,000 and $55,000 ($90,000 and $110,000 if you file a joint return). You cannot claim a credit if your MAGI is $55,000 or more ($110,000 or more if you file a joint return). This is an increase from the 2005 limits of $43,000 and $53,000 ($87,000 and $107,000 if filing a joint return). For more information, see chapters 2 and 3.

Tuition and fees deduction. This deduction, which was scheduled to expire at the end of 2005, has been extended through 2007. For more information, see chapter 6.

Education savings bond program. . Beginning in 2006, the amount of your interest exclusion will be phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (MAGI) is between $94,700 and $124,700. You cannot take the deduction if your MAGI is $124,700 or more. For 2005, the limits that applied to you were $91,850 and $121,850. For all other filing statuses, your interest exclusion is phased out if your MAGI is between $63,100 and $78,100. You cannot take the deduction if your MAGI is $78,100 or more. For 2005, the limits that applied to you were $61,200 and $76,200. For more information, see chapter 10.

Business deduction for work-related education. Beginning in 2006:

Estimated tax. If you have taxable income from any of your education benefits and the payer does not withhold enough income tax, you may need to make estimated tax payments. For more information, see Publication 505, Tax Withholding and Estimated Tax.

Education credits. The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. For information on the areas that are in the Gulf Opportunity Zone, see Publication 4492. For information about the expanded credits for GOZ students, see Form 8863.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication explains tax benefits that may be available to you if you are saving for or paying education costs for yourself or, in many cases, another student who is a member of your immediate family. Most benefits apply only to higher education.